Big handset makers may discontinue sub-Rs 5k models

New Delhi: Major mobile handset makers may move away from the sub- Rs 5,000 segment this year, industry executives and analysts say, as the entry-level space shrinks due to low demand and higher distribution costs.

As a result, buyers in this pricesensitive category may have to settle for used or refurbished devices on the back fewer variants for first-time smartphone buyers with low budgets. “Almost all brands have decided to move away…due to reasons like low natural demand, inertia of migrating to smartphones and the relative cost of offline distribution for potential consumers in this segment,” said Navkender Singh, research director at International Data Corporation (IDC), India. The segment may see only tepid growth this year unless brands or telecom operators offer a bundled service plan with smartphones for less than Rs 2,500 to address the lifetime or maintenance cost of ownership, Singh added.

Sale of smartphones priced below Rs 5,000 declined 45% on year in 2019. This comes after a 25% fall in 2018, according to Counterpoint Research. This year, the fall is likely to be sharper as the segment’s share in the overall smartphone pie is predicted to shrink to just 2%, from 4% in 2019. This comes as average selling prices of smartphones in India are expected to touch $170 in 2020, compared with $160 in 2019 and $159 in 2018, according to IDC data.

Xiaomi, which was the last tier-1 brand to launch a smartphone priced below ?5,000, is also moving towards higher-priced categories now, said Neil Shah, research director at Counterpoint Technology Market Research.

The Chinese handset-maker has around 40% share in the entry-level category, while Indian brands — Lava and Micromax — together hold less than 2%, data from Counterpoint Research showed.

Refurbished devices are also competing fiercely with low-cost smartphones, which are not tech-heavy and cannot offer a satisfactory digital experience, experts say.

However, the market dynamics may not altogether favour refurbished phones over new ones since the consumers who prefer refurbished phones are distinct from those seeking to buy new phones, according to CyberMedia Research.

“The refurbished phone market caters to aspirational buyers who seek to buy premium smartphones from the likes of Apple and Samsung at very low, affordable prices,” said Prabhu Ram, head of Industry Intelligence Group, CMR.

Some analysts believe that there is still huge potential in the entry-level space, as the market is primarily driven by upgrade opportunity among a wide base of over 450 million feature phone users.